Achieving Growth in the Luxury Market: The Leading Hotels of the World (LHW) Leveraged Brand Extension, Joint Venture Partnerships, and Strategic Alliances to Make Revenues and Profits Soar as Well as Triple Shareholder Value

By Maresco, Peter A.; Lyons, Bridget | Strategic Finance, May 2005 | Go to article overview

Achieving Growth in the Luxury Market: The Leading Hotels of the World (LHW) Leveraged Brand Extension, Joint Venture Partnerships, and Strategic Alliances to Make Revenues and Profits Soar as Well as Triple Shareholder Value


Maresco, Peter A., Lyons, Bridget, Strategic Finance


In Travel + Leisure's "500 Greatest Hotels in the World," 114 on the list are members of Leading Hotels of the World (LHW). LHW members are so impressive that these hotels, such as the CopaCabana Palace Hotel in Rio de Janeiro, have been the meeting place of kings, princes, and presidents. Other member hotels include The Plaza in New York City; Majestic Barriere in Cannes, France; and The Oberoi in Sahl Hahsheesh, Egypt. First-class service is the norm. More than 400 hotels in 80 countries with an average nightly fee of $376 have joined Leading Hotels of the World. As the largest and best-known group of luxury independents, LHW works to promote the interests of its member hotels by providing association with its five-star hotel brand and access to many LHW services, such as extensive sales and promotional activities, advertising and public relations support, and an array of special programs for member hotels and their guests. Member hotels benefit from the affiliation while, at the same time, they retain autonomy and control.

Founded in 1928 as a luxury hotel-reservation processing company, The Leading Hotels of the World, Ltd., which is headquartered in New York City, has evolved into a highly recognizable luxury brand within the luxury hotel market. The company has spent the last decade transforming itself from a reservation-processing company into a luxury powerhouse. Leading Hotels provides a compelling lesson in how to effectively achieve growth in the luxury market and today has positioned itself to meet its vision: "To become the preeminent provider of products and services to luxury hotels and to the luxury marketplace." Let's take a closer look at how the company grew into a worldwide powerhouse.

THE 1990S: TRANSITION AND OPTIMISM

While the organization continued to successfully promote stays at its member hotels, LHW management realized in the early 1990s that continued growth of its core business--luxury hotels--would be difficult to maintain since the organization had already penetrated many of its targeted global markets. While all organizations struggle to design business strategies that effectively promote growth, this task is especially daunting within the constructs of the luxury brand market because increased penetration of existing markets could dilute the brand. Therefore, LHW management needed to differentiate LHW services while growing their core brand at the same time. In effect, the company had to form partnerships and leverage its well-known brand name into new profit-generating ventures.

Led by Paul McManus, president and chief executive officer, senior management transformed LHW into a full-service luxury hotel brand over the past decade. They cultivated the Leading Hotels of the World global hospitality image and implemented specific marketing and Internet strategies previously unavailable within the luxury hotel segment. The successful transformation resulted from a competitive strategy based upon careful analysis of market conditions and industry trends.

McManus joined The Leading Hotels of the World, Ltd. in 1992 as vice president of marketing. In 1993 he became executive vice president, assuming various duties associated with the president's office while continuing with his responsibility for the company's worldwide marketing efforts. Appointed president and CEO in January 1998, McManus and LHW Chairman Jean-Jacques Gauer began to rethink the organization's corporate mission and overall philosophy. Their conclusion: The organizational direction should shift from simply reservation taking to a more aggressive strategic marketing position. As part of the process, in 1998 LHW changed its focus from a not-for-profit business to an ongoing concern and developed plans to raise additional capital.

Management began the transformation by refocusing on developing shifts in its customer base. They conducted market studies that indicated shifting market trends were taking place and developed a strategic analysis of how LHW could provide additional value to its existing and--perhaps more importantly--its potential customers. …

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